J Hampton -- Saint Peter's University



Gb629 Enterprise Risk Management

Fall 2020 Course Syllabus

Professor Name John J. Hampton Email hamptonjohnj@

Phone 201 761-6390 Office Location: School of Business

Office Hours Wednesday 1:00-4:00 or by appointment

Description

This course covers hazard and operational risk under the framework of enterprise risk management. It examines ERM contributions with special attention to the emerging risks from rapid developments in technology and new exposures arising from a complex and fast-moving global business environment. It discusses implementing ERM using recent developments in technology and recent essays on risk management topics.

Outcomes

Students can expect the following outcomes in this course:

• They will improve written communications.

• They will have a better understanding of ethical responsibilities of the profession.

• They will recognize problems and apply strategic analysis.

• They will reason analytically and make data-driven decisions.

Textbook. Enterprise Risk Management, 2020, electronic download, .

Grading

The grade is based upon.

• Part 1. Exercises. 50 percent of the grade.

• Part 2. Exercises. 50 percent of the grade.

Due Dates for Submissions

Exercises should be submitted by email to hamptonjohnj@ as follows:

* Part 1. Tuesday October 6

* Part 2. Tuesday November 3

Note: This course does not use Blackboard for ongoing communications. All communications and submissions are via email.

Exercises. They are printed at the end of this syllabus.

Exercises Submission 1.

Chapter 1. The History of Risk.

Chapter 2. Modern Risk Management.

Chapter 3. Enterprise Risk Management (ERM).

Essay 1. Risk Management in a 'Crazy' World

Essay 2. Overconfidence in Risk Management

Essay 3. ERM Lessons from Dubai's Near-Default

Essay 4. Significant Risks in ERM

Essay 5. Risk Management and the Board

Essay 6. ERM and Extreme Risk

Exercises Submission 2.

Chapter 4. Concentrate on the Big Picture.

Chapter 5. Recognize Upside of Risk.

Chapter 6. Acknowledge Risk Interaction.

Essay 9. ERM and Product Launch

Essay 11. Governance and ERM

Essay 13. Least Risk or Most Opportunity

Essay 15. Hidden Risks in Business Analytics

Essay 17. Truthiness: The New Threshold of Reality

Requirements for Completing the Exercises

• Complete all exercises with at least 50% of them using the engaged format described below. Show you understand the point of the exercise. Add a little something to it.

• Choose either the basic or engaged format for each exercise.

Question: What are examples of a speculative risk not named in the book?

Basic Format Answer A speculative risk exists when we have the possibility of a loss along with the chance to make a profit. Examples are betting on horse races, buying stocks and bonds, and real estate investment. This differs from a pure risk where only a loss is possible.

Engaged Format Answer

A speculative risk exists when we have the possibility of a loss along with the chance to make a profit. Examples are betting on horse races, buying stocks and bonds, and real estate investment. This differs from a pure risk where only a loss is possible.

Since we know that pure risk is a risk in which loss is the only possible outcome, there is no beneficial result. Pure risk is related to events that are beyond the risk-taker's control and, therefore, a person cannot consciously take on pure risk.

An example is the possibility that a person's house will be destroyed due to a natural disaster. In this example, it is unlikely that there would be any potential benefit to this risk.

There are products that can be purchased to mitigate pure risk. For example, flood insurance can be used to protect homeowners from the risk that their homes will be destroyed by an overflowing river. Other examples of pure risk events include premature death, identity theft, and career-ending disabilities.

Requirements for Responding to the Essays

For each essay, explain the key risk management points, and discuss them. Use engaged answers for every essay.

Submitting Parts 1 and 2

Carefully follow these submission guidelines to avoid delays that affect grading.

• Copy the exercises and essay questions from the syllabus to a separate MS Word file for submission 1.

• Repeat the process to a different MS Word file for submission 2

• Save each file with Your last name.

• Continue the file name with the Course #, Submission#

• Example: Gomez Gb629 Part 1.

• Answer each question in order.

• Do not repeat the wording of the question in your answer.

• Send a single MS Word document for each part as an attachment to an email to hamptonjohnj@. Do not use BlackBoard for submissions.

Confirmation

The instructor will confirm receipt of the exercises and project within four days. If no confirmation is received, query the instructor.

Plagiarism and Cheating

To promote and protect academic integrity, the University's policy against plagiarism must be unconditionally respected. Students found to be committing acts of plagiarism will face academic sanctions to be determined by the professor as well as the administration. Plagiarism includes submitting the work of other parties as your own and downloading information from the Internet without identifying the link.

Exercises Submission 1.

Chapter 1. The History of Risk.

1-1. Of the Hindu-Arabic numbering system. the Protestant reformation, and the contribution of Paccioli, some people think Paccioli was the most important for understanding risk management. Do you agree? Explain your reasoning.

1-2. A golf club offered a $1 million dollar prize for any golfer in a tournament who hit a hole in one. This is foolish in terms of risk management because it could bankrupt the club if three people hit a hole in one in the tournament. Do you agree? Explain your reasoning.

1-3. It can be argued that the start of risk management began with either Thomas Newcomen, James Watt, or George Stephenson. Which one created the greatest risk to be managed. Justify your answer.

1-4. In the 19th century, critics claimed that the Hartford Steam Boiler Inspection had a conflict of interest when it both inspected and insured boilers. Do you agree? Explain your reasoning.

1-5. The text argues that Henry Ford created both automobile and non-automobile risk. Thus, he should be recognized as the “Father of Risk Management.” Do you agree? Explain your reasoning.

1-6. Of the Will Rogers’ quotes on risk management, which is your favorite? Explain your reasoning.

Chapter 2. Modern Risk Management.

2-1. Cite an Internet source that reports the frequency of ice storms in the United States. Given what you found, was Jet Blue negligent in its response to the 2007 Valentine’s Day disruption in New York? Explain your reasoning.

2-2. As a result of an incident in 2009, people think Chesley “Sully” Sullenberger is an expert on risk management. Has he made any contributions to the world of risk management since the event? If yes, what has he done? If no, why has he been silent?

2-3. From the description in the textbook, the Chinese understand the nature of risk better than Americans? Do you agree? Explain your reasoning.

2-4. Ask someone to read out loud the following paragraph from the textbook. Talk to the person for 60 seconds and then ask, “What did the paragraph describe?” Did the person see the big picture of risk? Explain your reasoning.

“With hocked gems financing him, our hero bravely defied all scornful laughter that tried to prevent his scheme. "Your eyes deceive," he had said. "An egg not a table, correctly typifies this unexplored planet." Now three sturdy sisters sought proof. Forging along, sometimes through calm vastness, yet more often very turbulent peaks and valleys, days became weeks as many doubters spread fearful rumors about the edge. At last from nowhere welcome winged creatures appeared, signifying momentous success.”

2-5. Ask five people if they would consider purchasing at an airport an insurance policy covering the loss of life connected to an upcoming flight. Give them the choice to pay $10 for one of the following.

• A life insurance policy pays $10,000.

• An accidental death insurance policy pays $10,000.

• A terrorism death insurance policy pays $10,000.

After getting the answer, ask each person to estimate, “How many total people died while flying Delta, United, Southwest, American, or Jet Blue in the past 10 years? From the answers to both questions, do you think those people have a good understanding of the risk of flying? Explain your reasoning.

Chapter 3. Enterprise Risk Management (ERM).

3-1. Hurricane Andrew revealed one failure to share information and another on the use of data. Which is the more important risk management lesson? Explain your reasoning.

3-2. The textbook suggests managing risk and pursuing opportunity in a single coordinated program to achieve or fulfill survival, stability, fiduciary responsibility, and ethics. Do you agree? Explain your reasoning.

3-3. Of the definitions of ERM in the textbook, which is your favorite? Explain your reasoning.

3-4. Alignment with the business model should be a requirement of an ERM program. Do you agree? Explain your reasoning.

3-5. The risk management lesson from the fire at Phillips N.V. deals with a significant loss as discussed in the textbook under ERM accountability. Do you agree? Explain your reasoning.

3-6. From the story of the Russian chicken shipment, what would you recommend if no Russian partner could be identified? Explain your reasoning.

Essay 1. Risk Management in a 'Crazy' World

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 2. Overconfidence in Risk Management

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 3. ERM Lessons from Dubai's Near-Default

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 4. Significant Risks in ERM

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 5. Risk Management and the Board

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 6. ERM and Extreme Risk

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Exercises Submission 2.

Chapter 4. Concentrate on the Big Picture.

4-1. With respect to the threat of a subway attack in New York City, the Police Commissioner Story shows people ignore data when thinking about risk. Do you agree? Explain your reasoning.

4-2. When dealing with a risky situation, do you mostly rely upon your logical left brain or creative right brain? Explain your reasoning.

4-3. In spite of the current opioid crisis, doctors and pharmaceutical companies largely follow the Johnson and Johnson Credo. Do you agree? Explain your reasoning.

4-3. With respect to Peter Drucker’s view, college students who borrow large amounts of money to pay for tuition have the big picture when they make the borrowing decision. Do you agree? Explain your reasoning.

4-4. The BP Oil crisis had little to do with risk management. The company was just unlucky. It could happen to anyone. Do you agree? Explain your reasoning.

4-5. The story of Mr. Lee is out of date. It has little to do with your own plans for how you use your MBA degree and how you plan for the future of your career. Do you agree? Explain your reasoning.

4-6. The Justice Department made the wrong risk management decision when it blocked Microsoft’s effort to purchase Intuit. Do you agree? Explain your reasoning.

4-7. It was not Dr. Brendan Reilly’s job to fool around with the lives of his patients in conflict with proven medical procedures. Do you agree? Explain your reasoning.

4-8. The Lehman fraud taught us a lesson. Something similar will not be allowed by investors or the government in the future. Do you agree? Explain your reasoning.

Chapter 5. Recognize Upside of Risk.

5-1. The story about the female vice president is interesting but it really does not have an ERM message. It should be deleted from future issues of the textbook. Do you agree? Explain your reasoning.

5-2. Tata Motors had a unique risk management concept in 2009. Based on Tata’s efforts today as reflected in Internet postings, was it an effective long-term risk management strategy. Explain your reasoning. Cite your sources.

5-3. The textbook contains upside of risk strategies historically by IBM and more recently by wireless telephone companies. Are these unethical behaviors by the companies? Explain your reasoning.

5-4. Thomas Watson Sr. and Ken Olson had different views of personal computers as compared to Bill Gates. The contrast affords an important risk management lesson. What is it? Explain your reasoning.

Chapter 6. Acknowledge Risk Interaction.

6-1. The story of Hurricane Katrina illustrates an important risk management lesson. What is it? Explain your reasoning.

6-2. Do some research on the Internet. It will show that Amazon has not learned its lessons from the failures to deliver in 2013. Do you agree? Explain your reasoning.

6-3. In 2018, the United States imposed harsh tariff policies as part of a program of risk management to protect U.S. jobs. The textbook stories of Ford Motor and Thailand floods show that this is a logical strategy. Do you agree? Explain your reasoning.

6-4. The story of the Hawthorn effect does not actually show an interaction among risks. Do you agree? Explain your reasoning.

6-5. The story of zero percent interest at General Motors contains an important risk management lesson. Or does it? Explain your reasoning.

6-6. Does visually tagging risk really contribute to a better understanding of risk interaction? Explain your reasoning.

Essay 9. ERM and Product Launch

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 11. Governance and ERM

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 13. Least Risk or Most Opportunity?

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 15. Hidden Risks in Business Analytics

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

Essay 17. Truthiness: The New Threshold of Reality

What is the risk management lesson of this essay? Do you agree with it? Explain your reasoning.

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